Modern Miracle of Oil: $147 a Barrel in summer, $39 on Chanukah

Chanukah marks the ancient miracle of olive oil. A modern miracle: oil-rich Arab nations - and Iran - in panic over the plunge in crude oil prices.

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Tzvi Ben Gedalyahu, 23/12/08 12:33

Ancient and modern oil miracles

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Chanukah marks the ancient miracle of a day's supply of pure olive oil burning for eight days in the Holy Temple. This year, another miracle is oil-rich Arab nations in panic over the plunge in crude oil prices from $147 in the summer to less than $40 on Chanukah.

The Festival of Lights will also be remembered for the victory of a small band of Jews over Greek rulers who tried to destroy Judaism. However, the current generation also will remember, for at least a few days, the plunge in the price of crude oil that virtually no one predicted would be so swift and so far.

Similar to the effect of the 1973-74 Arab oil embargo that forced up the price of crude by nearly 500 percent to $40 a barrel, this year's spike ended up harming Arabs nations as much as anyone else.

The worldwide recession, which was sparked by extended credit in the United States but was exacerbated by inflationary prices that fueled the demand for more credit, has pushed oil-rich Arab nations into a frenzy over expected debts.

Analysts also have estimated that the plunge might succeed where the western world has failed in its attempt to stop Iran from becoming a nuclear power.

Asked about the prospects of Middle East peace amid increasingly violent and unstable Arab states and continuing struggles with Israel, Likud Knesset candidate Dan Meridor told Newsweek, "Chanukah is, among other things, a holiday of miracles. If oil prices stay low, this may open opportunities for tough sanctions to work."Chanukah is, among other things, a holiday of miracles. If oil prices stay low, this may open opportunities for tough sanctions to work.

He added, "When the Iranians were getting $140 a barrel, with a budget based on maybe $60 to $70 a barrel, they had a surplus they could pour into the economy to offset the impact of international sanctions … But if sanctions become really serious, and at [the] same time oil prices remain at current levels, I think there is chance of getting the Iranian leadership to rethink their strategy."

The collapse of the crude oil market "is putting Iran under the kind of pressure that Tehran has not endured for several years," Newsweek noted. Its reporter Michael Hirsh wrote that the drop in the price of crude may even add enough pressure on Iran to abandon its nuclear program and help voters to defeat Iranian President Mahmoud Ahmadinejad in next June's elections.

Iran's oil, which is of lower quality than other oil producers, fetches less than $35 a barrel on today's market. The country's inflation rate is 30 percent, and the government, burdened by outlays for the nuclear development program and other weapons systems, is looking at a $50 billion deficit.

The mood of the public is angry and several reports from Iran indicate that the regime is becoming more oppressive against protestors. Nevertheless, newspaper headlines last week bannered, "What has the government done with $200 billion in oil revenues?"

Saudi Arabia, whose oil sheikhs have been wading in opulence from billions of dollars of excess money, is worried about facing its first budget deficit in six years. Deficits also are expected in Bahrain, Oman and the United Arab Emirates.

Despite dizzying inflation in grain prices, partly fed by the rapid rise in the price of crude oil, "the real damage, of course, has been done to those oil exporters that thought high prices were here to stay," wrote former United Press International (UPI) editor Martin Walker.

"Russia, whose state budget was predicated on oil at $90 a barrel, has lost about 30 percent of its financial reserves as the trade balance worsened and the ruble began its sharp decline," he reported.

"The real estate bubble in Dubai has deflated, and, battered by the double effect of falling oil prices and OPEC's announced production cuts, the economies of the Gulf States are faltering.